Since the start of the Covid-19 pandemic, there has been huge disruption to established supply chains. Treasurers must now consider everything from increased commodity risk to new FX requirements and growing ESG expectations. NatWest’s Mirka Skrzypczak, Head of Working Capital & Trade Products, and Rowan Austin, Head of Trade Origination and Advisory, outline six steps treasurers can take to leverage the opportunities among the sea of change.
1. Improving resilience and commodity sourcing to better manage black swan events.
Prior to 2020, supply chains had become increasingly global and complex, with a focus on driving down costs. “Despite some Brexit challenges, supply chain vulnerabilities were not necessarily front of mind pre-Covid – both buyers and suppliers were operating in a comfort zone,” says Skrzypczak.
Now, though, corporates must continuously build resilience into their supply chains, enabling them to adapt to ongoing external events and continue to operate smoothly. “With the energy crisis, exacerbated by the war in Ukraine, and persistent challenges related to Covid-19, treasurers must work with their colleagues in sales and procurement to build an adaptive resilience strategy around their supply chain,” she advises.
This includes everything from assessing customer viability to researching alternative suppliers. And from a financial perspective, treasurers must rigorously assess commodity risk, and seek out intelligent hedging solutions, given the current energy crisis and the war in Ukraine. “Hedging commodities has never been so important in terms of managing price risk throughout black swan events, both from the point of view of the corporate’s own working capital, and from the perspective of buyers and suppliers – all of whom will be hit by rising prices,” she notes.